Computerizing accounting systems: COVID-19 spurs move to digitize

The Philippines remains under various levels of community quarantine due to the COVID-19 pandemic. Government and private offices are temporarily closed or maintain limited operations with alternative work schemes such work-from-home. These measures have naturally affected business operations and processes. There has also been a noted increase in the use of online selling platforms as companies and entrepreneurs try to continue or augment operations during the quarantine.

The transition to digital platforms has not been without compliance challenges. Businesses have experienced difficulties in issuing duly authorized invoices or receipts because of the expiration of the Authority to Print, the inaccessibility of invoices and receipts, or the near impossibility of mailing or sending them during the enhanced community quarantine (ECQ) from March 16 to May 31. This greatly limited sales and collection since these documents are vital for claiming deductions and input VAT.

To address this, the Bureau of Internal Revenue (BIR) allowed businesses to adopt work-around procedures such as electronically sending invoices and receipts during the ECQ, subject to certain guidelines and procedures in Revenue Memorandum Circular (RMC) No. 47-2020.

These circumstances and experiences highlight the importance of digitizing business operations and processes. It is certainly high time for businesses to adopt a computerized accounting system (CAS). For those with an existing CAS, this may be the opportunity to modify or enhance it to update bookkeeping, invoicing and accounting processes. One challenge though is that the BIR requires prior authorization or permit to use a CAS, computerized books of account (CBA) and/or its components.

Revenue Memorandum Order (RMO) No. 21-2000, issued on July 17, as amended by RMO No. 29-2002, issued on Sept. 16, required all taxpayers with a CAS or their components, to apply for a Permit to Use (PTU). The RMO also required taxpayers to apply for a new PTU for any system enhancement that will result in changes to the system’s release and/or version number.

PROCEDURE UNDER RMO NO. 21-2000, AS AMENDED
Under the RMO, all applications for CAS are to be generally filed by a company’s head office at the Large Taxpayers Office (LTO) or Revenue District Office (RDO) having jurisdiction over the head office.

The application will only be processed if the RMO requirements are complete. These include documentation on the functions and features of the application, system flow, process flow, back-up procedure, disaster and recovery plan, proof of ownership, reports, correspondences, receipts and invoices that can be generated from the system with a sample layout.

The application will then be evaluated and approved by a Computerized System Evaluation Team (CSET) at the BIR national or regional office. The evaluation will include a system demonstration showing actual use of the CAS.

Under the RMO, as amended, the PTU should be issued within 10 to 40 days, depending on certain conditions. In the experience of some taxpayers, however, the evaluation takes longer. The delay is usually due to the difficulty in scheduling the system demonstration and addressing issues identified by the CSET during the demonstration.

CENTRALIZATION OF CAS APPLICATIONS
In 2015, the BIR issued RMC No. 68-2015, creating the National Accreditation Board (NAB) composed of BIR officers from various divisions in the BIR National Office. The RMC directed that accreditation of cash register machines (CRM), point-of-sale systems (POS), and other sales machines/receipting software were to be processed at the BIR National Office level only through the NAB.

While RMC No. 68-2015 specifically covered the accreditation of CRM, POS, etc., the NAB also took on the responsibility of evaluating CAS applications of taxpayers registered under the RDOs.

Some would say that, as a result of the centralization, the scheduling of system demonstrations and evaluation of the applications took much longer because the national body was alone in handling all CAS applications of taxpayers under the RDOs. Others believe that this has contributed to a backlog of pending applications.

SUSPENSION OF REQUIREMENT FOR A PTU
Early this year, the BIR issued RMC No. 10-2020, suspending the requirements for a PTU. This was carried out to promote ease of doing business and more efficient government service delivery. The RMC also reverted the processing of CAS applications to the RDOs as well as simplified documentary requirements.

Specifically, all taxpayers with pending PTU applications (including those that had undergone system demonstrations) will be allowed to use a CAS, CBA, and/or their components, without the PTU, provided the relevant requirements are submitted to the Technical Working Group (TWG) Secretariat of the RDO or Large Taxpayer Office (LTO) where they are registered. These requirements include a duly accomplished and notarized Sworn Statement and various attachments (i.e., Summary of System Description, Commercial invoice/receipts/document description, and special power of attorney, among others); sample printouts of system-generated principal and supplementary receipts or invoices; and sample printouts of system-generated Books of Account.

Instead of the PTU, an Acknowledgment Certificate (AC) with a Control Number will be issued by the TWG Secretariat — within three working days from receiving the requirements. The Control Number should then be indicated on the system-generated principal and/or supplementary receipts/invoices. Taxpayers should be aware that a post-approval evaluation may be conducted to check compliance with revenue issuances. This can take place during a BIR audit or investigation.

For any system enhancement, modification and/or upgrade that results in a change of version number and/or systems release, the taxpayer is now only required to inform the TWG Secretariat where it is registered. This is done in writing accompanied by a matrix showing the comparative changes in the current and upgraded system.

The RMC specifically referred to taxpayers with pending PTU applications with the BIR. It is not clear if this simplified procedure is the same for new applications filed after its effectivity. Moreover, the RMC provides that the BIR release separate revenue issuances on the detailed procedures implementing the RMC and the post-approval evaluation check. Pending more succinct implementation guidelines, the RDOs and LTOs may interpret the RMC differently.

The issuance of RMC No. 10-2020 is one of the many steps taken by the BIR to achieve its plans for a more digitized tax environment, encouraging compliance from taxpayers by allowing them, in the meantime, to use their existing CAS without a PTU. This also gives them the opportunity to start preparing for the upcoming implementation of the mandatory e-invoicing and electronic sales-reporting requirement under the TRAIN Act in 2023.

RMC No. 10-2020 is certainly a welcome development for taxpayers particularly at this time when businesses may need to digitize to adapt and thrive during the pandemic. In the meantime, taxpayers eagerly await the immediate issuance of the implementing procedures to allow for greater clarity and a more uniform and effective application of the RMC. This would, once and for all, streamline the procedures for using CAS.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Zorayda H. Panumpang and June Catherine G. Tañedo are Senior Directors from the Tax Division of SGV & Co.